Will ICAO hit Thailand hard and are the big ULCC investors moving to grab Jetlines?

By TESTCustomwebLP TESTCustomwebLP
February 11, 2015 15:37

Canada Jetlines has scrapped a proposed $50m IPO. Jetlines, a Canadian ultra-low-cost carrier (ULCC) based in Vancouver that is scheduled to start flying to secondary airports in Western Canada in 2015, announced late last week that a reverse takeover deal with Inovent Capital has been abandoned so that the airline could follow a new opportunity which may yet still involve an IPO at a later date. But yesterday morning Inovent issued a press release saying that it has rejected Jetlines’ termination notice, alleging that the airline does not have the right to terminate their agreement. The release stated that “Inovent is withdrawing its support of Jetlines’ prospectus because it does not consider it to be reliable, citing a failure to disclose “certain material adverse developments in the Jetlines business”. Jetlines then issued a statement to say that it still plans to begin flying this summer and to proceed with an order for up to 21 737 MAX aircraft for delivery beginning 2021. So who has approached Jetlines? Well the Jetlines business model is to undercut WestJet and Air Canada by up to 40% as a ULCC and that business model will resonate to a few investors – Bill Franke of Indigo Partners and Declan Ryan of Irelandia for example. Will one of those show their hand over the coming weeks? If they do then Jetlines is indeed in very safe hands and will do very well indeed – Watch this space!

Meanwhile one cannot ignore the fact that there are a growing number of press reports stating that the International Civil Aviation Organisation (ICAO) may very well downgrade Thailand’s air-safety rating in the coming weeks following a damning report on the back of a January inspection. Somchai Piputvat, director-general of the Thai Civil Aviation Department was forced to state yesterday, that ICAO was likely to downgrade the air-safety rating of Thailand’s civil-aviation system.

If this were to happen then it is likely that EASA and the FAA would have to react and that would affect licences for 10 Thai-registered airlines operating international flights, 10 domestic and chartered airlines, and one cargo carrier.

So the question you have to ask is: Will the Thai authorities be able to take swift and decisive action on the ICAO recommendations or will there be too much ground to make-up at speed as was the case with the Philippines a few years ago? If the latter is the case then expect all Thai carriers to enter a period of isolation and contraction in 2015.